Starbucks sales trail estimates as growth slows

By Leslie Patton, Bloomberg News

April 21, 2016

Photo: Gianluigi Guercia /AFP /Getty Images

Starbucks is trying to boost sales by adding new restaurants. The company is adding about 1,800 net new locations this fiscal year — including 900 in its rapidly expanding China and Asia Pacific region. On Thursday, it opened its first store in sub-Saharan Africa, a location in Johannesburg, South Africa.

While revenue rose 9.4 percent to $4.99 billion in the quarter ended March 27, that missed analysts’ $5.03 billion average projection. Profit increased to 39 cents a share, excluding some items, Seattle-based Starbucks said in a statement Thursday. That matched analysts’ average estimate.

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The results signal that competitors may be chipping away at Starbucks’ dominance by following its strategy of hooking customers with loyalty programs and smartphone apps. Dunkin’ Donuts started testing mobile ordering late last year, while Panera Bread Co. has said its digital sales may reach $1 billion in 2017. Both chains also have rewards programs with millions of members.

Same-store sales growth in Starbucks’ Americas region, which includes the U.S., slowed to 7 percent. Analysts estimated a 7.4 percent gain, according to Consensus Metrix. Sales by that measure climbed 9 percent in the prior quarter.

“It’s good, but I guess not good enough,” said Peter Saleh, an analyst at BTIG. “When the stock is trading where it is in terms of valuation, you need to have an upside surprise.”

Starbucks shares fell 4.3 percent to $58.03 in late trading in New York. Through Thursday’s close, the company had gained 1 percent this year.

The company reiterated the top end of its forecast for profit, excluding certain items, to be as much as $1.89 a share in the current fiscal year. Revenue will rise 12 percent, helped in part by a longer year, Starbucks said, repeating an earlier projection.

Starbucks’ app and rewards program, which have locked in millions of members, gives it access to diners’ eating habits so they can offer appealing deals to them. The company has even considered licensing its technology to other retailers.

Along with technology, Starbucks is trying to boost sales by adding new restaurants. The company is adding about 1,800 net new locations this fiscal year — including 900 in its rapidly expanding China and Asia Pacific region. Despite the recent economic turmoil in China, CEO Howard Schultz has said he’s “bullish” on the country and that it could be bigger than the U.S. market.